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22 January 2013 | Anna Reynolds
Business leaders and governments are failing to consider the impact of resource constraints when making long-term financial decisions, according to new research.
In the report Resource constraints: sharing a finite world a team from Anglia Ruskin University and the Institute and Faculty of Actuaries examined the current rate of worldwide consumption and projections for a range of resources including oil, coal, natural gas, uranium, land, food, water and metals.
The research found there is enough oil for just 50 years, while worldwide supplies of coal will run out in just over 100 years. This will lead to higher energy and commodity prices, forcing businesses to innovate by creating appropriate substitutes.
Growing populations and urbanisation has led to an increase in large-scale land purchases. Furthermore, the average quality of global soil is falling due to changes in farming and weather conditions, which will have global repercussions on food availability and prices.
The overall trend for metals, meanwhile, is increasingly difficult extraction, lower quality ores and higher demand.
The report warned that the global economy and the financial sector are facing severe risks as a result and recommended governments and financial institutions make decisions today based on the impact that resource scarcity will have on the products and services we buy.
Peter Tompkins, from the Institute and Faculty of Actuaries, said: “Despite strong evidence that there is a risk that resource constraints could have significant economic impacts, this is not being factored in by many actors in the global economy.”
In addition, the report suggested actuaries should play a larger role in advising business leaders of the potential risks over natural resource constraints.
Tompkins added that factoring resource constraints into risk management measures could significantly limit future damage. “Our research finds that many current savings structures, such as pension schemes, may have to be re-designed if we are entering a low-growth economic paradigm.”